In the aftermath of an extremely critical consultant’s report onits handling of a prospective asset sale, Southern California Gashas reached a settlement with one part of the state regulatorycommission and is separately trying to reopen the possible sale ofits smallest Los Angeles Basin underground natural gas storagefacility in an eastern Los Angeles suburb. An administrative lawjudge (ALJ) with the California Public Utilities Commission isconsidering whether to recommend the deal to the full five-memberCPUC.

The proposed settlement includes a $3.5 million penalty, amongother requirements imposed on SoCalGas. A utility consumer group,The Utility Reform Network (TURN), and another branch of the CPUC,the Office of Ratepayer Advocates (ORA), are opposing thesettlement. In a separate action, SoCalGas has asked the CPUC toreconsider its case seeking permission to sell the storagefacility, which the gas utility operated since 1956 on leases for adepleted oil field owned by Unocal dating back to 1939.

The proceedings leading to a sale were halted last spring when a36-page report commissioned by the CPUC alleged that the nation’slargest gas utility had used unethical, if not illegal, businesspractices in dealing with property rights of single-familyresidence landowners bordering the facility. Subsequently, hearingswere slated to begin last fall, but the ALJ suspended the hearingwhile the parties negotiated. The proposed settlement was filed inNovember.

SoCalGas’ move toward getting CPUC approval of the sale wasstopped based on consultant Margaret C. Felts’ report, whichalleges that the gas utility told civil courts one story inattempting to secure all of the property and mineral rights at thestorage field, based on the need to operate the facility as part ofthe gas utility, while at the same time telling the CPUC the fieldwas no longer needed and should be sold.

In addition to the multi-million-dollar fine that will bedivided among eight public interest groups, the settlement directsSoCalGas to offer nearby landowners the opportunity to get backtheir oil rights and to write a letter of apology to the CPUCenergy division, which the utility allegedly misled. At the timethe report was made public, SoCalGas officials strongly denied anywrong-doing, noting they had no intention to mislead and had notviolated any CPUC rules.

Nevertheless, the CPUC-commissioned report indicates thatbefore, during and after applying Jan. 16, 1998 to sell theunderground storage facility, SoCalGas sought the use of eminentdomain in the courts (from 1996 through 98) to obtain the land andmineral rights ownership, arguing that they were needed forcontinued utility operations at the storage field.

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